Two Americas: Public vs. Private Sector – How did this happen?

DJH: Over the past few weeks, I have had the privilege of hosting two fine men in our home in Southern California. Both are men of impeccable character, relentless work ethic, and both work in fields that involve saving people’s lives. And, both are “50 something” baby boomers who are seriously contemplating their retirement in the next 5 years or so.

That’s where the similarities ended!

You see, one of them has worked in the public sector for 25 years and the other has worked in the private sector. My public sector friend is about to embark on a retirement that is the financial equivalent of Disney World – a lifetime pension and health care plan that grants annual raises tied to COLA (the cost of living index).

My private sector friend has no such financial future awaiting him. He had to save every working day of his life. He seems to have a pretty good nest egg, but who knows if it will be enough to sustain a 30+ year retirement? I can tell you first hand, that nothing is more disturbing than watching your nest egg shrink by 35% as politicians pontificate about fiscal responsibility, while taking on endless debt for social programs and vilify the very financial institutions you trust to look after the wellbeing of your nest egg for the rest of my life.

One more thing — my friend who works in the public sector, the one who has a “Cadillac Pension and Healthcare” retirement plan for life, has had a rather average government career. He worked for a small city in a middle management position. I think he attended some college courses, but he certainly could have been granted this “priceless” retirement package without a college degree.

On the other hand, my private sector friend has had a very extraordinary career. He is internationally recognized as one of the top practitioners in his field. By the way, it’s a field that requires 10+ years of college just to get your foot in the door. He worked his way up the ladder and took on massive amounts of college tuition debt. Today people seek out his services from all over the world to save their lives (oh yeah, he has also written several books on his field of expertise.) If there is such a thing as the “quintessential private sector career,” he has it.

Yet my rather average public sector friend is the man who gets the dream retirement package and my friend who’s dedicated his life to a “quintessential private sector career” is the one who’s struggling with the adequacy of his hard earned nest egg.

Two Americas — How did this happen?

My friend Mark Perry published a very interesting story on this subject yesterday on his blog Carpe Diem. When you consider my story and then read the analysis Mark presents, your hair will stand on end.

I’m not sure how we got to this place. I do know that I spend a lot of time studying the issues and the candidates in every election and never recall being asked to vote for someone who told me they’d create this massive imbalance between private sector and public sector compensation and yet it looks like it’s the one thing that Washington DC accomplished with precision.

As I have been saying for quite some time, if you work in the private sector, you better start doing your political homework and make sure your vote goes to someone who’s looking out for you!

1. The number of federal employees exceeded 2.8 million for the first time in January 2009, and federal jobs have increased by 82,000 employees since December 2008.

2. Average federal salaries exceed average private-sector pay in more than eight out of 10 comparable occupations. From USA Today, a sampling of average annual salaries in 2008 are displayed below, the most recent data (click to enlarge):

3. Also from USA Today, the typical federal worker is paid $11,091 more per year (20% higher salary) than private-sector workers in the same occupation, based on median annual salaries.

Federal Employees: $66,591

Private-Sector Employees: $55,500

4. According to USA Today, average annual benefits (health, pension, etc.) in 2008 for federal employees was more than 4 times greater than benefits for private workers, a difference of almost $31,000 per year:

•Private. The private sector paid more on average in a select group of high-skill occupations, including lawyers, veterinarians and airline pilots. The government’s 5,200 computer research scientists made an average of $95,190, about $10,000 less than the average in the corporate world.

•State and local. State government employees had an average salary of $47,231 in 2008, about 5% less than comparable jobs in the private sector. City and county workers earned an average of $43,589, about 2% more than private workers in similar jobs. State and local workers have higher total compensation than private workers when the value of benefits is included.

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